Oil And Gas Markets Cause Of Concern For Trucking Companies

While other areas of the trucking industry are stronger than ever before, that’s not the case for all trucking companies. With falling crude prices and the continuing decline of energy, trucking companies in this market are struggling to make it. Larger trucking fleets that have the funds are buying up smaller trucking companies one by one.

Last week, Daseke Inc. said it would buy Hornady Transportation LLC, its second acquisition in just over a month. After the deal is completed, Daseke’s fleet will total over 3,000 tractors and 6,000 trailers, an increase in the tractor count of about 40% since last fall and a 50% addition in trailers.

Hornady Transportation LLC has been in business since 1925, 90 years of business. This goes to show that nobody is safe operating in the oil and gas markets. Hornady operated 230 tractors and 325 trailers out of Birmingham, Ala.

Addison, Texas-based Daseke says in terms of equipment that it operates, the company is the largest flatbed trucking company in the U.S., although Landstar System Inc. is larger by revenue under a system that focuses on using independent owner-operator drivers.

Flatbed Trucking Remains Strong

Flatbed truckers have fallen on hard times after several years of rapid expansion driven by the falling oil market. With oil prices careening toward six-year lows, producers have been cutting back on drilling, reducing the need for heavy equipment. Although flatbed trucking among the oil states have declined, overall flatbed trucking is up and has been for a few straight years.

According to the FTR Transport Intelligence, loads carried on flatbed trucks are up by 4.7% in the second quarter from a year earlier, compared with 10% increases in 2013 and 2014. Freight rates inched up 2% last quarter, compared with an average 8.25% in all of 2014,

When you look at the flatbed trucking industry, you don’t see a lot of big companies. Most of them are owner operator and only have a few trucks. These small outfits are being bought up at an alarming rate, we wonder if oil and crude will ever recover.

We’ll See Companies Merging In This Market

One option that these smaller flatbed trucking companies have is creating mergers. I’m sure we’ll see it, but it’s still early. If crude continues on the path of declining, these flatbed trucking companies and owner operators will have to do something. Flatbed trucking is growing, but the energy department and crude markets are suffering.

According to Wall Street Journal, publicly traded Landstar said in June it had increased its fleet capacity by 717 trucks, or more than 8%, in the second quarter, mainly by adding more owner-operators.

Daseke didn’t disclose the terms of its acquisition of Hornady. Both companies are privately held, though Bloomberg reported last month that the company is planning an initial public offering. Likely this helped their case with investors.